Hong Kong: Japan’s broad stock index slid to a 25-year low on Friday after a warning from General Motors about possible bankruptcy slammed Wall Street, but hopes for more stimulus spending in China limited losses in most Asian markets.
World stocks struck a six-year low on the drop in Japan, which was led by shares in the country’s big exporters and banks, with investors spooked after shares in Citigroup fell below $1 the previous day.
European stocks were set to open steady or dip slightly, according to financial bookmakers, as investors braced for what was expected to be a grim US jobs report later in the day.
“I’m worried about America, and the place where we can place our hopes now is China,” said Yoku Ihara, manager at Retela Crea Securities in Tokyo, adding that he was concerned about the progress of the US economic stimulus plans.
Asian equity markets held up better than their counterparts in the United States and Europe, thanks partly to hopes that China will boost its planned $585 billion in infrastructure spending to help offset the damage from collapsing exports.
China’s central bank chief, Zhou Xiaochuan, said on Friday that he sees signs of the economy recovering and officials would err on the side of acting sooner rather than later to revive growth in the world’s third largest economy.
The dollar retreated and oil prices climbed in a slight reversal of Thursday’s moves sparked by the stock market slide, while Japan’s woes pushed investors into safe-haven government bonds.
Japan’s TOPIX shed 2.7% to hit its lowest since December 1983, while the Nikkei lost 3.5% to be less than 200 points above a 26-year low hit last October.
The MSCI index of Asia-Pacific stocks outside Japan was down 0.5%. Australia fell 1.4% and Hong Kong shed 1.6%. On Thursday, the US S&P 500 tumbled 4.3%.
“If you see fire breaking out in someone else’s house, it causes worries about your own, too. The latest development in the US corporate sector is very worrisome,” said Y S Rhoo, a market analyst at Hyundai Securities in Seoul.
The deepening sell-off in major stock markets came ahead of the US payrolls report at 1330 GMT, which is expected to show companies slashed 648,000 jobs in February, taking layoffs in the last four months to 2.4 million - more than double the number of jobs created altogether in 2007.
The unemployment rate is forecast to hit a 25-year high of 7.9%.
The European Central Bank and Bank of England chopped interest rates to record lows on Thursday as they struggled to pull their economies out of a tailspin.
The BoE went a step further, saying it will print money to buy £75 billion worth of government bonds as central banks try to limit the damage from the financial crisis and sharpest recession in decades.
But Merrill Lynch analysts said in a research note that there were several signs that Asia’s economies were starting to stabilise, including a recovery in Chinese manufacturing and Korean exports to China.
Highlighting the see-saw nature of Asia markets, the South Korean won - the most battered of regional currencies - recovered to post gains on the day after initially falling to an 11-year low.
The dollar index, a gauge of its performance against six major currencies, dropped 0.7% to 88.418 and retreated from a three-year peak reached this week as market players cut long positions before the jobs report. The euro climbed 0.8% to $1.2643
Oil prices also pushed higher after tumbling 4% on Thursday on worries about demand as the deep global recession drags on. US crude oil futures edged up 72 cents to $44.33 a barrel.
Safe-haven buying helped nudge the benchmark 10-year Japanese government bond yield down 2 basis points to 1.290%.
Gold climbed $6.80 to $938.80 an ounce after rising more than 2% in the previous session.